The One After the Superbowl, part 1 - S2-E12
Audio problem: When Phoebe is showing the children her guitar in the library, her voice comes on saying, "I know," when the children are amazed by her guitar. Look carefully - her lips are not moving when she says this.
Answer: Usually by the seventh night of Hanukkah you don't know what to get the other person, and you will probably resort to getting the other person something insignificant. Chandler is basically saying that the pen is a stupid gift.